The Sweeper: How Roman Abramovich Has Played His Rivals

Big StoryChelsea are debt-free. Their owner and benefactor Roman Abramovich has converted no less than $541 million in interest-free loans to the Premier League club into equity, apparently in advance of possible forthcoming UEFA financial regulations that will require clubs in the Champions League to be breaking even to enter the competition by 2012.

But this does not mean the future is necessarily rosy for the club. Chelsea’s hopes (expressed early into Abramovich’s reign by Peter Kenyon) of becoming profitable by 2010 have clearly not been realised. As generous as Abramovich has been with these loans, now converted to equity, the question remains whether the club can continue at its current competitive level without further massive cash injections from the Russian, which seem unlikely to come.

Indeed, this may be exactly why Abramovich has recently taken a different strategy to squeeze his rivals in the coming years, culminating in this debt-relief. It was a visit from Abramovich himself to Michel Platini at UEFA that gave considerable momentum to the plans for the proposed new “financial fair play” regulations in European competition.

This of course is convenient for Abramovich and Chelsea, as their main rivals do not have the same option of their billionaire owner converting debt into equity. The banks will not be so kind to Manchester United or Liverpool. Abramovich remains rich enough to do this, even if he is not crazy enough to keep pumping in hundreds of millions of more dollars into the club to keep up. He has attempted to make the club big enough to generate serious cash itself, and is now using the unsustainability of the Premier League’s madcap spending that he helped generate in the first place to push UEFA to restrain the rest of the elite as he draws back.

Pretty clever, if you think about it.

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Yet the dangers of reliance on a benefactor are clearly shown elsewhere in the Premier League. Portsmouth have been given until February 10th to clear their debts to HM Revenue and Customs, a deadline they are unlikely to be able to make, and are thus likely to be made bankrupt. A long saga of mismanagement and broken promises is ending in disaster. As John Beech comments, looking at the club’s history back to the 1970s, “Portsmouth provide a textbook example of the unsustainability of the benefactor model.”

Gary Megson is fired as manager of Bolton, and it’s the fans blamed by Barney Ronay at the Guardian for “a rather grisly, bullying version of “fan power”.” It’s curious, though, that the piece never mentions who actually fired Megson (hint: it wasn’t the fans.).

Very clever strategy by Abramovich. It’s the right thing for FIFA to do because apart from Manchester City there really isn’t any clubs in Europe who can keep spending the sums to improve their team. Let’s not forget that the Germans have their own fiscal model that keeps them well run clubs.

Spain’s elite Barcelona and Madrid are financed by the Catalan and Spanish authorities respectively. Financial fair play is needed on so many levels for the good of the games fiscal well being, the opening up of competition in all the major leagues and the limiting of the ridiculous amounts of money paid to average players around Europe.

It will be interesting to see how Platini reacts to this as it’s clear that United and Liverpool will not be able to reshape their debt with their current owners.